Wall Street Analysts Are Predicting Something Never Seen Before, and It Should Come as a Huge Warning for Investors
Yahoo Finance ·
Wall Street sell-side analysts are historically an optimistic bunch. The group responsible for publishing research reports and setting price targets for stocks for brokerage firms and investment banks usually recommends buying most of the stocks they cover. An optimistic outlook makes a lot of sense. Most investors, by virtue of risking their money on future outcomes, are optimists. But Wall Street analysts are now predicting something never seen before. And despite the optimism they share, it should come as a huge warning for investors. The S&P 500 ( ^GSPC +0.00% ) has historically produced aggregate compound earnings growth of about 6.5% since 1989. Today, analysts are expecting the aggregate earnings growth for the stocks in the index to climb an average of 25.5% over the next five years. That's the highest level ever recorded dating back to 1995. That optimism may reflect the belief that artificial intelligence (AI) will be a transformative technology that will massively increase productivity for businesses. We saw a similar phenomenon among analysts at the height of the dot-com bubble, as the proliferation of the World Wide Web held similar promises for businesses.
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